Shareholder activism is in fashion this spring. In the wake of Roy Disney and Stanley Gold’s ‘vote no’ campaign against Disney’s Michael Eisner, another group of dissident shareholders launched an initiative to oust Safeway’s CEO and two of its directors. Then in late March Delaware judges attended the annual Council of Institutional Investors’ meeting in Washington where a number of hot-button governance issues, including executive compensation, topped the agenda. Their presence was unusual and indicates a change in mindset – away from corporate management and toward investors – among US judges.
In this environment, it’s no wonder Disney’s board felt the need to respond to a request from a group of public pension funds to meet and discuss, among other things, management succession. Some funds are clearly not satisfied with Eisner giving up his chairman role but retaining his CEO position after a 43 percent withhold vote at the company’s annual meeting on March 3. The situation is turning into a real mud sling, with Disney and Gold apparently demanding the company disclose how many of its employees withheld votes for Eisner – the former board members reportedly got wind that up to 70 percent of the entertainment company’s workers voted against its CEO.
On the flip side, critics contend this groundswell of activism on the part of public pension funds stinks of politics. Pension fund trustees are, after all, often bound to the unions they represent. And attempts to oust CEOs attract the sort of media coverage that often disgraces management and glorifies pension activists. This succeeds in reinforcing the idea public pension funds are fighting for the pensions of regular workers, still stung by the abuses of a handful of corporate executives.
At the frontlines of this wildcat activism are IROs and communications professionals. At Disney, for instance, former aide to New York Governor George Pataki, Zenia Mucha, has her hands full defending Eisner against those who want him out of the Disney CEO chair. As chief communications officer at the entertainment company, Mucha is reportedly in close contact with the beleaguered chief and is busy attacking his attackers. Following the company’s annual meeting, for example, she called proxy firm Glass Lewis ‘an upstart company trying to grab publicity’, after it recommended shareholders withhold their support for Eisner.
It’s unlikely activism will go out of style next spring when every day we’re still reading about management messing up. Whether it’s Shell’s ongoing reserves saga or Nortel delaying its results, these headlines help fuel shareholder activism, predicated on the idea management doesn’t know how to run a given company and is probably paid too much. IROs should probably now stress to management the importance of that old standard, Under promise and over deliver. It seems to be the best policy when trying to build and maintain shareholder trust.
